Nicotine pouches have been a surprise winner for tobacco companies – the UK is coming for them in October

For most of the past decade the tobacco industry’s central problem looked terminal.

Cigarette volumes keep falling, and BAT told investors on Tuesday (2 June) that it expects the global market to shrink by around 2.5% this year alone.

Yet the FTSE 100 group spent much of its pre-close trading update talking up a product most British shoppers had barely heard of five years ago: the nicotine pouch.

BAT, which owns the Velo brand, said its New Category arm, the cluster of products meant to stand in for cigarettes, is now growing revenue in the mid-teens, an upgrade on its earlier guidance. The clear standout is Modern Oral, the category that contains pouches.

BAT called it its fastest-growing line and, by its own assessment, the one carrying the lowest risk profile relative to cigarettes, a claim the company is careful to caveat as neither risk-free nor non-addictive.

Velo is posting double-digit revenue growth and gaining share in every region the company operates in.

That is a striking turn for a product category that did not meaningfully exist in British corner shops a few years ago.

Pouches are small sachets of nicotine and flavouring that sit under the lip, with no tobacco, no smoke and no vapour. For an industry watching its core product decline year after year, they have become the surprise winner, and BAT is leaning into them hard.

An October deadline

The difficulty facing BAT is timing. From 29 October 2026, the UK introduces a minimum age of sale of 18 for all consumer nicotine products, a change that mainly affects pouches, alongside zero-nicotine vapes, under the new Tobacco and Vapes Act.

Until that date, pouches occupy an unusual regulatory gap. Because they contain no tobacco, they have fallen outside tobacco and vaping law and instead under general product safety rules, which means there has been no legal minimum age to buy them at all.

The Act, which passed Parliament in April, closes that gap and goes further. It hands ministers new powers to regulate the flavours, packaging, display and advertising of pouches and other consumer nicotine products, and to stop them being branded in ways that appeal to children.

Industry watchers expect secondary legislation on flavour restrictions and a cap on nicotine strength to follow, potentially aligning pouches with the limits already applied to vapes.

The UK matters to BAT here in a way the headline numbers do not spell out. It is one of only seven markets the company counts as its top Modern Oral territories, a group that together accounts for roughly 90% of the industry’s global pouch revenue.

A clampdown in Britain is not a footnote for Velo and lands in one of the markets the brand is built on.

The threat of regulation

BAT does not have to speculate about what regulation does to a fast-growing nicotine category, because it is already living it. Tucked into the section on its Vuse vapour brand, the company conceded that financial delivery had been hit by regulatory changes in the UK and Poland.

That is the disposable vape ban and the tightening rules showing up in black and white in BAT’s own accounts. The pouch business is now walking towards the same kind of intervention, with a fixed date attached.

For consumers, the immediate practical change is narrower. Adults who use pouches will still be able to buy them, and there is no sign of an outright ban.

What shifts is the shape of the market: tighter age checks at the till, fewer of the bright packs and sweet-sounding flavours that drew scrutiny, and a category that finally sits inside the rulebook rather than outside it.

For BAT, the bet is that the product is established enough to absorb all of that and keep growing. Tuesday’s update suggests the company is confident it will.

The next eight months will test whether the surprise winner can keep winning once Britain sets the rules.

Now read: The Manchester area with 51 vape shops on two streets – and the UK’s plan to fix it